10 thoughts on “New Feature: When People Don’t Know What They’re Talking About”

  2. David Leonhardt of The New York Times did the analysis earlier this week. Two excerpts:

    Add the two together, and you get the true hourly compensation of Detroit’s unionized work force: roughly $55 an hour. It’s a little more than twice as much as the typical American worker makes, benefits included. The more relevant comparison, though, is probably to Honda’s or Toyota’s (nonunionized) workers. They make in the neighborhood of $45 an hour, and most of the gap stems from their less generous benefits.

    The third category is the cost of benefits for retirees. These are essentially fixed costs that have no relation to how many vehicles the companies make. But they are a real cost, so the companies add them into the mix — dividing those costs by the total hours of the current work force, to get a figure of $15 or so — and end up at roughly $70 an hour.

    The crucial point, though, is this $15 isn’t mainly a reflection of how generous the retiree benefits are. It’s a reflection of how many retirees there are. The Big Three built up a huge pool of retirees long before Honda and Toyota opened plants in this country.

    Imagine, also, that the U.A.W. agrees to reduce pay and benefits for current workers to $45 an hour — the same as at Honda and Toyota.

    Do you know how much that would reduce the cost of producing a Big Three vehicle? Only about $800.

    That’s because labor costs, for all the attention they have been receiving, make up only about 10 percent of the cost of making a vehicle. An extra $800 per vehicle would certainly help Detroit, but the Big Three already often sell their cars for about $2,500 less than equivalent cars from Japanese companies, analysts at the International Motor Vehicle Program say.

    I don’t have the figure handy, but I’m pretty sure that I have read that Ford, GM and Chrysler spend more than $1000 per vehicle on advertising. GM’s advertising budget in the first nine months of 2008 was $1.6 billion, up 16% from 2007!

  3. I don’t have a solution for Detroit, one should beware of speculating about industries you don’t work in; but of all the many industries in trouble why does this one generate so much emotional response?

  5. There are a great many things once beloved, going by the wayside.
    Private property rights
    Hunting as recreation
    Self-reliance and the belief in a Horatio Alger model
    If they are not self supporting…
    And no one even considered saving the Tucker, despite it’s technological superiority.
    Nor the Auburn/Cord/Packards despite their aesthetic superiority.

  6. …
    Nor the Auburn/Cord/Packards despite their aesthetic superiority.
    And while I drove massive 4x4s and all my friends actually BUILT Hotwheels (big blocked Camaro’s, ’59 Chevies, ’70 Charger), today they hotrod tiny Japanese engines.

    All that said – I don’t think anyone beat up AIG on the subject of executive compensation.

  7. This whole past three months have shown that the Treasury and Fed are pretty much making it up on the fly, from doing nothing for Lehman to doing, perhaps, too much for AIG. I think this stems in part from Paulson and Bernanke’s non-regulatory philosophy. While doing much more than Hoover, they are in a way shackled by their thinking in much the same way he and Mellon were. The result is inconsistency.

    Which isn’t too say that the new crew will have the answers, only that they may have more consistency. (And, if Keynes was right, they will probably be right, too.)

    I think the auto industry is so wholly American (despite the past 30 years) that it has symbolism beyond its value. (And GM was once the largest corporation in the world.) But, that said, I also think it is unconscionable to do nothing when 100s of thousands of jobs are at stake (millions?) in an economy that is already diving off the cliff.

    Libertarians of the Austrian School of Economics may argue that we should do nothing and let the markets be. Republicans from Alabama and South Carolina may think it’s an opportune moment to fuck the UAW. But I suspect reasonable people think “something” has to be done.

    Why pass on GM and then spend five times as much to restart the economy in some other way?

  8. I wonder how many dealers will be closing their doors whatever happens.

    Then I wonder how many newspapers will close their doors if they don’t have dealer advertising. And how many TV stations will reduce staff if they don’t have those dealer ads either.

  9. Not just newspapers.

    Auto advertising is massive — print, broadcast, and interactive (and not just traditional banner ad, etc.; auto dealerships represent a staggering percentage of PPC).

    The Big 3 doesn’t have to fail to impact the advertising industry, though. They’re already reducing ad budgets substantially, and the layoffs have begun because of it.

    God forbid your shop is dependent on an automaker right now.

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